American Home and Freddie Mac Resolve Servicing Dispute

September 19, 2007 No Comments »

It’s a day of resolution in the mortgage industry…

Less than a week after Freddie Mac sued American Home Mortgage to acquire information needed to continue servicing $800 million in mortgages, the two have come to a tentative agreement.

According to court paper filed late Tuesday, American Home said it would provide Freddie Mac with a detailed list of insurance and tax payment information as it becomes available to help pay $2.4 million in delayed property taxes and insurance premiums.

“We agreed to a consensual resolution so that the borrowers’ accounts can be brought up to date,” said Freddie Mac spokesman Brad German.

In the meantime, the 4,547 loans valued at $796.8 million will be turned over to Bank of America, the administrative agent for the loans, who agreed to service the loans temporarily.

Freddie Mac had earlier accused American Home of failing to make necessary insurance and tax payments, putting homeowners at risk of penalty or possibly losing their homes.

In a recent court filing, Freddie Mac said American Home stopped making tax and insurance payments Aug. 24 on loans it serviced, but that the servicer refused to release the associated loan files.

“We had the money to make payments, but we didn’t have the addresses,” German said.

Unfortunately, homeowners are ultimately responsible for ensuring taxes and insurance are paid, regardless of who is to blame for late or missed payments.

According to spokesman German, $2.4 million was wired Tuesday night to settle all outstanding insurance and tax payments.

The agreement still requires court approval, for which a hearing has been scheduled Thursday morning at a Wilmington, Delaware courthouse.

Melville, NY based American Home Mortgage was the 10th-largest U.S. mortgage lender before it filed for bankruptcy protection early last month.

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